lfg-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

_____________________________

Commission File Number:

001-39644

_____________________________

Archaea Energy Inc.

(Exact name of registrant as specified in its charter)

_____________________________


Delaware			85-2867266
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

4444 Westheimer Road, Suite G450

Houston, Texas 77027

(Address of principal executive offices and zip code)

(346) 708-8272

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

LFG

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2022, there were 81,592,637 shares of Class A Common Stock and 39,052,668 shares of Class B Common Stock issued and outstanding.

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TABLE OF CONTENTS
		Page
Commonly Used Terms and Definitions		3

Forward-Looking Statements		5

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Archaea Energy Inc.

	Consolidated Balance Sheets – As of September 30, 2022 and December 31, 2021	6

	Consolidated Statements of Operations – Three and nine months ended September 30, 2022 and 2021	7

	Consolidated Statements of Equity – Three and nine months ended September 30, 2022 and 2021	8

	Consolidated Statements of Cash Flows – Nine months ended September 30, 2022 and 2021	10

	Notes to Unaudited Consolidated Financial Statements	11

	Aria Energy LLC (Predecessor)

	Consolidated Statements of Operations – For the periods from July 1 to September 14, 2021 and from January 1 to September 14, 2021	37

	Consolidated Statements of Comprehensive Income – For the periods from July 1 to September 14, 2021 and from January 1 to September 14, 2021	38



	Consolidated Statement of Cash Flows – For the period from January 1 to September 14 , 2021	39

	Notes to Unaudited Consolidated Financial Statements	40

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	53

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 3.	Defaults Upon Senior Securities	58

Item 4.	Mine Safety Disclosures	58

Item 5.	Other Information	58

Item 6.	Exhibits	59

	SIGNATURES	60

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Commonly Used Terms and Definitions

Unless the context otherwise requires, the terms “Archaea” and the “Company” refer to Archaea Energy Inc. and its consolidated subsidiaries. In addition, the following company or industry-specific terms and abbreviations are used throughout this Quarterly Report on Form 10-Q (this “Report”):

Archaea Merger: The transactions executed pursuant to the Archaea Merger Agreement

Archaea Merger Agreement: The Business Combination Agreement, dated April 7, 2021, as subsequently amended, pursuant to which, among other things, RAC acquired Legacy Archaea

Aria: Aria Energy LLC, a Delaware limited liability company, and its subsidiaries

Aria Holders: The members of Aria immediately prior to the Closing

Aria Merger: The transactions executed pursuant to the Aria Merger Agreement

Aria Merger Agreement: The Business Combination Agreement, dated as of April 7, 2021, as subsequently amended, pursuant to which, among other things, RAC acquired Aria

Atlas: Atlas Point Energy Infrastructure Fund, LLC, a Delaware limited liability company

Business Combination Agreements: The Aria Merger Agreement and the Archaea Merger Agreement

Business Combinations: The transactions executed pursuant to the Business Combination Agreements

CARB: California Air Resource Board

Class A Common Stock: Class A Common Stock, par value $0.0001 per share, of the Company

Class A Opco Units: Class A Units of Opco

Class B Common Stock: Class B Common Stock, par value $0.0001 per share, of the Company

Closing: The closing of the Business Combinations

Closing Date: The closing date of the Business Combinations, which was September 15, 2021

Common Stock: Class A Common Stock and Class B Common Stock

Environmental Attributes: Federal, state and local government incentives in the United States, provided in the form of RINs, RECs, RTCs, LCFS credits, rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy

EPA: The U.S. Environmental Protection Agency

GAAP: Accounting principles generally accepted in the United States of America

INGENCO: NextGen Power Holdings LLC and its subsidiaries

Initial Public Offering: RAC’s initial public offering, which was consummated on October 26, 2020

Legacy Archaea: Archaea Energy LLC, a Delaware limited liability company, and its subsidiaries

Legacy Archaea Holders: The members of Legacy Archaea immediately prior to the Closing

LCFS: Low Carbon Fuel Standard

LFG: Landfill gas

Lightning JV: Lightning Renewables, LLC, a joint venture with Republic Services Renewable Energy, LLC

Merger: The transaction contemplated by the Merger Agreement

Merger Agreement: The Agreement and Plan of Merger, dated October 16, 2022, pursuant to which, among other things, the Company and Opco will merge with and into wholly owned subsidiaries of BP Products North America Inc.

MMBtu: One million British thermal units

MWh: Megawatt hour(s)

Opco: LFG Acquisition Holdings LLC, a Delaware limited liability company, which was formerly named Rice Acquisition Holdings LLC

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Private Placement Warrants: The 6,771,000 warrants originally issued to Sponsor and Atlas in a private placement that closed simultaneously with the consummation of the Initial Public Offering

RAC: Rice Acquisition Corp., prior to the consummation of the Business Combination

RECs: Renewable Energy Credits

RINs: Renewable Identification Numbers

RNG: Renewable natural gas

RTCs: Renewable thermal certificates

SEC: U.S. Securities and Exchange Commission

Sponsor: Rice Acquisition Sponsor LLC, a Delaware limited liability company

VIE: Variable interest entity

Warrant Agreement: The Warrant Agreement, dated October 21, 2020, by and among the Company, Opco and Continental Stock Transfer & Trust Company, as warrant agent, which governs the Private Placement Warrants

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Forward-Looking Statements

The information in this Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “should,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other similar words. Forward-looking statements may relate to expectations for future financial performance, business strategies or expectations for the Company’s business. Specifically, forward-looking statements may include statements concerning the pending Merger, market conditions and trends, earnings, performance, strategies, prospects and other aspects of the business of the Company. Forward-looking statements are based on current expectations, estimates, projections, targets, opinions and/or beliefs of the Company, and such statements involve known and unknown risks, uncertainties and other factors.

The risks and uncertainties that could cause those actual results to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to:

•the risk that the proposed Merger may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of the Company’s Class A Common Stock;

•the effect of the announcement or pendency of the Merger on the Company’s business relationships, operating results and business generally;

•unexpected costs, charges or expenses resulting from the Merger;

•potential litigation relating to the Merger;

•the Company’s ability to successfully integrate INGENCO and other future acquisitions;

•the Company’s ability to recognize the anticipated financial, strategic and operational benefits of the Business Combinations, the INGENCO acquisition, the Lightning JV, and other future acquisitions and strategic transactions, which may be affected by, among other things, competition and the ability of the Company to grow and manage growth profitably and retain its management and key employees;

•the possibility that the Company may be adversely affected by general economic, business and/or competitive factors, including rising inflation and interest rates;

•the Company’s ability to develop and operate new projects, including the projects contemplated from the INGENCO assets and the Lightning JV;

•the reduction or elimination of government economic incentives to the renewable energy market;

•the execution of the Company’s contracting strategy and exposure to natural gas and Environmental Attribute prices for uncontracted volumes;

•delays in acquisition, financing, construction, and development of new or planned projects;

•the length of development cycles for new projects, including the design and construction processes for the Company’s projects;

•the Company’s ability to identify suitable locations for new projects;

•the Company’s dependence on landfill operators;

•existing regulations and changes to regulations and policies that affect the Company’s operations;

•decline in public acceptance and support of renewable energy development and projects;

•demand for renewable energy not being sustained;

•impacts of climate change, changing weather patterns and conditions, and natural disasters;

•the ability to secure necessary governmental and regulatory approvals;

•political instability and fears or actual acts of terrorism or war, including the armed conflict in Ukraine;

•the Company’s expansion into new business lines; and

•other risks and uncertainties described in the section entitled “Risk Factors” in Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”) or in the section entitled “Risk Factors” in Part II, Item 1A in subsequent Quarterly Reports on Form 10-Q, including this Report.

Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ARCHAEA ENERGY INC.

Consolidated Balance Sheets

(Unaudited)


(in thousands, except shares and per share data)	September 30, 2022		December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents ($191,404 related to VIE)	$	299,467	$	77,860
Restricted cash	19,225		15,206
Accounts receivable, net ($40 related to VIE)	47,255		37,010
Inventory	19,084		9,164
Prepaid expenses and other current assets ($105 related to VIE)	34,956		21,225
Total Current Assets	419,987		160,465
Property, plant and equipment, net ($103,359 related to VIE)	596,112		350,583
Intangible assets, net ($217,117 related to VIE)	999,787		638,471
Goodwill	47,833		29,211
Equity method investments	260,111		262,738
Operating lease right-of-use assets	6,639		—
Other non-current assets	16,573		9,721
Total Assets	$	2,347,042	$	1,451,189
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable - trade ($21,186 related to VIE)	$	31,777	$	11,096
Current portion of long-term debt, net	24,120		11,378
Current portion of operating lease liabilities	1,239		—
Accrued and other current liabilities ($632 related to VIE)	93,694		46,279
Total Current Liabilities	150,830		68,753
Long-term debt, net	887,824		331,396
Derivative liabilities	53,349		67,424
Below-market contracts	132,626		142,630
Asset retirement obligations	9,656		4,677
Long-term operating lease liabilities	5,657		—
Other long-term liabilities	2,553		5,316
Total Liabilities	1,242,495		620,196
Commitments and Contingencies
Redeemable Noncontrolling Interests	703,339		993,301
Equity
Stockholders’ Equity
Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding	—		—
Class A Common Stock, $0.0001 par value; 900,000,000 shares authorized; 81,592,637 shares issued and outstanding as of September 30, 2022 and 65,122,200 shares issued and outstanding as of December 31, 2021	8		7
Class B Common Stock, $0.0001 par value; 190,000,000 shares authorized; 39,052,668 shares issued and outstanding as of September 30, 2022 and 54,338,114 shares issued and outstanding as of December 31, 2021	4		5
Additional paid in capital	304,296		—
Accumulated deficit	(173,788)		(162,320)
Total Stockholders’ Equity	130,520		(162,308)
Nonredeemable noncontrolling interests	270,688		—
Total Equity	401,208		(162,308)
Total Liabilities, Redeemable Noncontrolling Interests and Equity	$	2,347,042	$	1,451,189

_________________________________________

Parenthetical references reflect amounts as of September 30, 2022 for the Lightning JV VIE.

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except shares and per share data)	2022		2021		2022		2021
Revenues and Other Income
Energy revenue	$	98,377	$	10,916	$	222,528	$	13,975
Other revenue	3,894		865		8,322		4,588
Amortization of intangibles and below-market contracts	2,722		205		8,259		205
Total Revenues and Other Income	104,993		11,986		239,109		18,768
Equity Investment Income, Net	2,945		879		7,067		879
Cost of Sales
Cost of energy	63,253		9,478		138,531		12,625
Cost of other revenues	3,109		615		7,049		2,976
Depreciation, amortization and accretion	16,972		3,142		43,191		4,077
Total Cost of Sales	83,334		13,235		188,771		19,678
General and administrative expenses	30,478		11,889		75,714		22,933
Operating Income (Loss)	(5,874)		(12,259)		(18,309)		(22,964)
Other Income (Expense)
Interest expense, net	(10,575)		(1,586)		(16,941)		(1,606)
Gain (loss) on warrants and derivative contracts	(7,605)		(10,413)		10,575		(10,413)
Other income (expense)	(124)		81		78		377
Total Other Income (Expense)	(18,304)		(11,918)		(6,288)		(11,642)
Income (Loss) Before Income Taxes	(24,178)		(24,177)		(24,597)		(34,606)
Income tax expense	57		—		186		—
Net Income (Loss)	(24,235)		(24,177)		(24,783)		(34,606)
Net income (loss) attributable to nonredeemable noncontrolling interests	(2,020)		(335)		(2,020)		(589)
Net income (loss) attributable to Legacy Archaea	—		(8,569)		—		(18,744)
Net income (loss) attributable to redeemable noncontrolling interests	(7,224)		(8,262)		(11,295)		(8,262)
Net Income (Loss) Attributable to Class A Common Stock	$	(14,991)	$	(7,011)	$	(11,468)	$	(7,011)
Net income (loss) per Class A Common Stock:
Net income (loss) – basic (1)	$	(0.18)	$	(0.13)	$	(0.15)	$	(0.13)
Net income (loss) – diluted (1)	$	(0.18)	$	(0.13)	$	(0.18)	$	(0.13)
Weighted average shares of Class A Common Stock outstanding:
Basic (1)	81,044,814		52,847,195		76,034,987		52,847,195
Diluted (1)	81,044,814		52,847,195		78,542,786		52,847,195

_________________________________________

(1) Class A Common Stock is outstanding beginning September 15, 2021 due to the reverse recapitalization transaction as described in “Note 4 - Business Combinations and Reverse Recapitalization.”

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Statements of Equity

(Unaudited)


			Total Equity
							Total Stockholders’ Equity
(in thousands)	Redeemable Noncontrolling Interests		Members’ Equity		Members’ Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Accumulated Deficit		Nonredeemable Noncontrolling Interests		Total Equity
Balance - December 31, 2021	$	993,301	$	—	$	—	$	7	$	5	$	—	$	(162,320)	$	—	$	(162,308)

Warrant exercises	—		—		—		—		—		11,836		—		—		11,836
Exchange of Class A Opco Units and Class B Common Stock for Class A Common Stock	(314,693)		—		—		1		(1)		314,693		—		—		314,693
Deferred tax impacts from exchange for Class A Common Stock transactions	—		—		—		—		—		780		—		—		780
Share-based compensation expense	—		—		—		—		—		12,785		—		—		12,785
Shares withheld for taxes on net settled awards	—		—		—		—		—		(2,634)		—		—		(2,634)
Shares issued to vendor	—		—		—		—		—		2,862		—		—		2,862
Net income (loss)	(11,295)		—		—		—		—		—		(11,468)		(2,020)		(13,488)
Contributions from Lightning JV noncontrolling interest owner	—		—		—		—		—		—		—		272,708		272,708
Adjustment of redeemable noncontrolling interests to redemption amount	36,026		—		—		—		—		(36,026)		—		—		(36,026)
Balance - September 30, 2022	$	703,339	$	—	$	—	$	8	$	4	$	304,296	$	(173,788)	$	270,688	$	401,208


			Total Equity
							Total Stockholders’ Equity
(in thousands)	Redeemable Noncontrolling Interests		Members’ Equity		Members’ Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Accumulated Deficit		Nonredeemable Noncontrolling Interests		Total Equity
Balance - December 31, 2020	$	—	$	34,930	$	(4,156)	$	—	$	—	$	—	$	—	$	717	$	31,491
Net income (loss) prior to Closing	—		—		(18,744)		—		—		—		—		(534)		(19,278)
Members’ equity contributions	—		70		—		—		—		—		—		—		70
Share-based compensation expense prior to Closing	—		2,349		—		—		—		—		—		—		2,349
Reclassification in connection with reverse recapitalization	—		(37,349)		22,900		—		3		37,346		(22,900)		—		—
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability	—		—		—		5		1		346,239		—		—		346,245
Issuance of Class B Common Stock in Aria Merger	—		—		—		—		2		394,908		—		—		394,910
Reclassification to redeemable noncontrolling interest	408,762		—		—		—		—		(431,662)		22,900		—		(408,762)
Net income (loss) after Closing	(8,262)		—		—		—		—		—		(7,011)		(56)		(7,067)
Adjustment of redeemable noncontrolling interest to redemption amount	779,116		—		—		—		—		(346,831)		(432,286)		—		(779,117)
Balance - September 30, 2021	$	1,179,616	$	—	$	—	$	5	$	6	$	—	$	(439,297)	$	127	$	(439,159)

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Statements of Equity

(Unaudited)


			Total Equity
							Total Stockholders' Equity
(in thousands)	Redeemable Noncontrolling Interest		Members' Equity		Members' Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Accumulated Deficit		Nonredeemable Noncontrolling Interests		Total Equity
Balance - June 30, 2022	$	606,608	$	—	$	—	$	8	$	4	$	392,118	$	(158,797)	$	—	$	233,333
Warrant exercises	—		—		—		—		—		10,280		—		—		10,280
Exchange of Class A Opco Units and Class B Common Stock for Class A Common Stock	3,134		—		—		—		—		(3,134)		—		—		(3,134)

Share-based compensation expense	—		—		—		—		—		3,862		—		—		3,862
Shares withheld for taxes on net settled awards	—		—		—		—		—		(871)		—		—		(871)

Shares issued to vendor	—		—		—		—		—		2,862		—		—		2,862
Net income (loss)	(7,224)		—		—		—		—		—		(14,991)		(2,020)		(17,011)
Contributions from Lightning JV noncontrolling interest owner	—		—		—		—		—		—		—		272,708		272,708
Adjustment of redeemable noncontrolling interest to redemption amount	100,821		—		—		—		—		(100,821)		—		—		(100,821)


Balance - September 30, 2022	$	703,339	$	—	$	—	$	8	$	4	$	304,296	$	(173,788)	$	270,688	$	401,208


			Total Equity
							Total Stockholders' Equity
(in thousands)	Redeemable Noncontrolling Interest		Members' Equity		Members' Accumulated Deficit		Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Accumulated Deficit		Nonredeemable Noncontrolling Interests		Total Equity
Balance - June 30, 2021	$	—	$	35,178	$	(14,331)	$	—	$	—	$	—	$	—	$	462	$	21,309
Net income (loss) prior to Closing	—		—		(8,569)		—		—		—		—		(279)		(8,848)

Share-based compensation expense prior to Closing	—		2,171		—		—		—		—		—		—		2,171
Reclassification in connection with reverse recapitalization	—		(37,349)		22,900		—		3		37,346		(22,900)		—		—
Net cash contribution from the reverse recapitalization and PIPE Financing, net of warrant liability	—		—		—		5		1		346,239		—		—		346,245
Issuance of Class B Common Stock in Aria Merger	—		—		—		—		2		394,908		—		—		394,910
Reclassification to redeemable noncontrolling interest	408,762		—		—		—		—		(431,662)		22,900		—		(408,762)
Net income (loss) after Closing	(8,262)		—		—		—		—		—		(7,011)		(56)		(7,067)
Adjustment of redeemable noncontrolling interest to redemption amount	779,116		—		—		—		—		(346,831)		(432,286)		—		(779,117)
Balance - September 30, 2021	$	1,179,616	$	—	$	—	$	5	$	6	$	—	$	(439,297)	$	127	$	(439,159)

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
(in thousands)	2022		2021
Cash flows from operating activities
Net income (loss)	$	(24,783)	$	(34,606)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation, amortization and accretion expense	43,191		4,077
Amortization of debt issuance costs	2,444		627
Amortization of intangibles and below-market contracts	(3,262)		(6)
Bad debt expense	153		10
Return on investment in equity method investments	15,202		336
Equity in earnings of equity method investments	(7,067)		(879)
Total (gains) losses on derivatives, net	(10,575)		10,413
Net cash received (paid) in settlement of derivatives	6,543		—
Forgiveness of Paycheck Protection Loan	—		(201)
Share-based compensation expense	12,785		2,887

Changes in operating assets and liabilities:
Accounts receivable	(4,336)		(692)
Inventory	(2,441)		(270)
Prepaid expenses and other current assets	1,687		(22,315)
Accounts payable - trade	8,300		(1,207)
Accrued and other liabilities	39,964		(7,475)
Other non-current assets	(585)		(3,490)
Other long-term liabilities	(63)		(1,919)
Net cash provided by (used in) operating activities	77,157		(54,710)
Cash flows from investing activities
Acquisition of Aria, net of cash acquired	1,876		(463,334)
Acquisition of assets and businesses	(274,556)		(31,527)
Additions to property, plant and equipment and progress payments	(225,868)		(88,209)
Purchases of biogas rights	—		(202)
Contributions to equity method investments	(10,837)		(4,100)
Return of investment in equity method investments	9,496		—
Net cash used in investing activities	(499,889)		(587,372)
Cash flows from financing activities
Borrowings on line of credit agreement	—		12,478
Repayments on line of credit agreement	—		(12,478)
Proceeds from long-term debt, net of issuance costs	573,751		361,959
Repayments of long-term debt	(9,618)		(47,040)
Proceeds from reverse recapitalization and PIPE Financing	—		496,397
Contributions from Lightning JV noncontrolling interest owner	88,508		—
Payment of acquisition contingent consideration	(1,650)		—
Capital contributions	—		70



Taxes paid on net share settled stock-based compensation awards	(2,633)		—
Net cash provided by financing activities	648,358		811,386
Net change in cash, cash equivalents and restricted cash	225,626		169,304
Cash, cash equivalents and restricted cash - beginning of period	93,066		1,496
Cash, cash equivalents and restricted cash - end of period	$	318,692	$	170,800

Supplemental cash flow information
Cash paid for interest (1)	$	11,480	$	1,869
Non-cash investing activities
Accruals of property, plant and equipment and biogas rights incurred but not paid	$	31,491	$	2,317

_________________________________________

(1) Net of capitalized interest of $6.1 million and $7.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

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ARCHAEA ENERGY INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Organization and Description of Business

Archaea Energy Inc. (“Archaea” or the "Company"), a Delaware corporation (formerly named Rice Acquisition Corp.), is one of the largest RNG producers in the U.S., with an industry-leading RNG platform primarily focused on capturing and converting waste emissions from landfills and livestock farms into low-carbon RNG and electricity. As of September 30, 2022, Archaea owns, through wholly-owned entities or joint ventures, a diversified portfolio of 46 LFG recovery and processing facilities across 20 states, including 13 operated facilities that produce pipeline-quality RNG and 33 LFG to renewable electricity production facilities, including one non-operated facility and one facility that is not operational.

Archaea develops, designs, constructs, and operates RNG facilities. Archaea, through wholly-owned entities or joint ventures, has entered into long-term agreements with biogas site hosts which grant Archaea the rights to utilize gas produced at their sites and to construct and operate facilities on their sites to produce RNG and renewable electricity.

Merger Agreement

On October 16, 2022, the Company and Opco entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BP Products North America Inc., a Maryland corporation (“Parent”), Condor RTM Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Condor RTM LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent (“Opco Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Company Merger”), and Opco Merger Sub will merge with and into Opco with Opco continuing as the surviving company and a wholly owned subsidiary of Parent (the “Opco Merger” and, together with the Company Merger, the “Merger”).

As a result of the Merger, (i) at the effective time of the Company Merger (the “Effective Time”), each share of Class A Common Stock outstanding immediately prior to the Effective Time (subject to certain exceptions, including shares of Class A Common Stock owned by stockholders of the Company who have not voted in favor of the adoption of the Merger Agreement and have properly exercised appraisal rights in accordance with Delaware law) will automatically be converted into the right to receive $26.00, without interest thereon (the “Per Share Price”) in cash, subject to applicable withholding taxes, and (ii) at the effective time of the Opco Merger (the “Opco Merger Effective Time”), each Class A Opco Unit outstanding immediately prior to the Opco Merger Effective Time that is held by a holder other than the Company or any of its subsidiaries will automatically be converted into the right to receive the Per Share Price in cash, subject to applicable withholding taxes. Also, at the Effective Time, each share of Class B Common Stock will be automatically cancelled and extinguished without any conversion thereof or consideration paid therefor.

Immediately following the Opco Merger Effective Time, each of the outstanding Private Placement Warrants will be redeemed for cash in accordance with the terms of the Warrant Agreement, as amended in connection with the Company’s entry into the Merger Agreement, which provides that immediately following the Opco Merger Effective Time, each Private Placement Warrant that is issued and outstanding immediately prior to the Effective Time will be automatically redeemed for the right to receive an amount, in cash, equal to (i) the Per Share Price minus (ii) the Warrant Price (as defined in the Warrant Agreement and which is currently $11.50) as reduced pursuant to the calculation provided in Section 4.4 of the Warrant Agreement, without interest.

The parties are targeting closing the Merger by the end of 2022, subject to customary closing conditions, including approval by the Company’s stockholders and receipt of regulatory approvals. Upon closing of the Merger, the Class A Common Stock will no longer be listed on any public market. See “Note 21 - Subsequent Events” for more information regarding the Merger.

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ARCHAEA ENERGY INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Business Combinations

On September 15, 2021, Archaea consummated the business combinations pursuant to (i) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Aria Merger Agreement”), by and among Rice Acquisition Corp., a Delaware corporation (“RAC”), Rice Acquisition Holdings LLC, a Delaware limited liability company and direct subsidiary of RAC (“RAC Opco”), LFG Intermediate Co, LLC, a Delaware limited liability company and direct subsidiary of RAC Opco (“RAC Intermediate”), LFG Buyer Co, LLC, a Delaware limited liability company and direct subsidiary of RAC Intermediate (“RAC Buyer”), Inigo Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Aria Merger Sub”), Aria Energy LLC, a Delaware limited liability company (“Aria”), and Aria Renewable Energy Systems LLC, a Delaware limited liability company, pursuant to which, among other things, Aria Merger Sub was merged with and into Aria, with Aria surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Aria Merger Agreement, the “Aria Merger”), and (ii) the Business Combination Agreement, dated April 7, 2021 (as amended, the “Archaea Merger Agreement”), by and among RAC, RAC Opco, RAC Intermediate, RAC Buyer, Fezzik Merger Sub, LLC, a Delaware limited liability company and direct subsidiary of RAC Buyer (“Archaea Merger Sub”), Archaea Energy LLC, a Delaware limited liability company, and Archaea Energy II LLC, a Delaware limited liability company (“Legacy Archaea”), pursuant to which, among other things, Archaea Merger Sub was merged with and into Legacy Archaea, with Legacy Archaea surviving the merger and becoming a direct subsidiary of RAC Buyer, on the terms and subject to the conditions set forth therein (the transactions contemplated by the Archaea Merger Agreement, the “Archaea Merger” and, together with the Aria Merger, the “Business Combinations”). Legacy Archaea was determined to be the accounting acquirer of the Business Combinations, and Aria was determined to be the predecessor to the Company. Unless the context otherwise requires, the “Company,” “we,” “us,” and “our” refer, for periods prior to the completion of the Business Combinations, to Legacy Archaea and its subsidiaries and, for periods upon or after the completion of the Business Combinations, to Archaea Energy Inc. and its subsidiaries, including Legacy Archaea and Aria Energy LLC.

Archaea has retained its “up-C” structure, whereby (i) all of the equity interests in Aria and Legacy Archaea are held indirectly by Opco through RAC Buyer and RAC Intermediate, (ii) Archaea’s only assets are its equity interests in Opco, and (iii) Sponsor, Atlas, the RAC independent directors, the Legacy Archaea Holders and the Aria Holders own or owned economic interests directly in Opco. In connection with the consummation of the Business Combinations, Rice Acquisition Holdings LLC was renamed LFG Acquisition Holdings LLC. In accordance with Accounting Standards Codification (“ASC”) 810 - Consolidation, Opco is considered a VIE with Archaea as its sole managing member and primary beneficiary. As such, Archaea consolidates Opco, and the remaining unitholders that hold economic interests directly in Opco are presented as redeemable noncontrolling interests on the Company’s financial statements.

Subsequent to the Business Combinations, transactions impacting the ownership of Class A Opco Units include warrant exercises, repurchases from Aria Renewable Energy Systems LLC, redemption of certain other Class A Opco Units in exchange for Class A Common Stock, and issuances related to vested restricted stock units (“RSUs”). The ownership structure of Opco upon closing of the Business Combinations and as of September 30, 2022, which gives rise to the redeemable noncontrolling interest at Archaea, is as follows:


	September 30, 2022			September 15, 2021
Equity Holder	Class A Opco Units	% Interest		Class A Opco Units	% Interest
Archaea	81,592,637	67.6	%	52,847,195	45.9	%
Total controlling interests	81,592,637